Answer to Question #61324 in Microeconomics for DEEPTHI
a. If Jamie decides to embark on her new venture, what will her accounting cost be during the first year of operation? Her implicit costs? Her opportunity cost?
b. Suppose that Jamie’s estimated selling price is lower than originally projected during the first year. How much revenue would she need in order to earn positive accounting profits? positive economic profit?
Implicit costs = $75,000
Opportunity cost includes both implicit and explicit costs: $145,000 + $75,000 = $220,000;
b) As accounting profits = Total revenue – accounting costs to earn positive accounting profits, the revenues per year should be greater than $145,000. Economic profit = Total revenue – opportunity costs. So to earn positive economic profits, the revenues per year must be greater than $220,000.
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